Morning Reads 12/5/2012

Lockheed is planning for “Texas: The Country,” by moving over 500 jobs from “Atlanta: the State” to Fort Worth.

A couple of Postal Workers from Georgia plead guilty to stealing checks in Federal court. Maybe this is why it took me two weeks longer than friends in Macon to receive a letter in Warner Robins.

Georgian Banks are bouncing back, according to the FDIC. Dear General Assembly, maybe you need to change the law in such a way as to prevent Banks from simply foreclosing on property whenever they arbitrarily call performing notes due. Or not. You know, whatever floats your boat.

In looking for a Forbes article on the need to get Fannie/Freddie to refi credit worthy upside down folks at 4% or so and creep up bank borrowing rates so they’d better address non- performing assets this one popped up:

I’ve advocated refi’s of those upside down in housing in various columns here since 2008.

But I don’t see how this will force banks to lend more money, as the kind of lending you’re talking about isn’t the securitized housing mortgage market, but consumer and commercial lending. Or either I’m missing your point.

Drifting back to my original remark is that if banks had to pay a slowly increasing rate for money wouldn’t they get more aggressive in clearing non-performing assets – stale capital not being in play ?

No, because that’s not how banking works. Banks make money on commercial (non-securitized) loans by margin. If rates were higher, they would be paying higher rates on deposits while they would be charging more for what they loan.

Banks make money off of lending by making the most loans possible (that get paid back). They don’t get paid for sitting on deposits. Thus my original question as to what mechanism would cause/force this.

Because what banks need are stable/sound regulations, and credit worthy borrowers. If they have that, they’ll make all the loans they can.

Guess I’m out of touch or misinformed. There are different types of banks but commerical banks, I thought, have not made non-securitized loans since the crisis. Many savers have moved to securities other than CD’s and many friends I know in private business primarily use private sources for loans.

Of course if rates were higher, they’d pay higher interest and get more deposits to put into play. I don’t have the numbers on non-performing assets but that has to have an impact on earnings, ability to loan and regulations on leverage.

Banks are pretty clever in waiting for the Feds to bail out bad loans, support selected homebuyers with deductions or checks, make short sales a tax free gift or come up with fees to overcome nuisance regulations.

Banks are much more concerned about preserving capital in this environment. The various regulators are crawling all over them to show that regulators are doing their jobs now, after virtually ignoring their job when alarm bells should have been raised in the first half of the 2000’s.

Thus, banks are hesitant, still, to loan to anyone with credit issues, cash flow issues, or anything that looks like a collateral deficient loan. As such, it’s hard for them to find customers. And as you said, they compete with other types of lenders (finance companies backed by commercial paper) that don’t have the same regulatory oversight. So the marginal loans get picked up by the finance companies, and the banks are in a regulatory environment where they are preserving capital while taking the most minimal risks possible.

As such, they’re maybe not lending what we would “like”, but they’re also not making loans that are likely to go bad while they continue to purge their books of the previously questionable loans.

Local banks have evolved into simple functions such as human interface processing of car loans and checking account customer servicing as needed. These are now automated service commodities, the banks having removed themselves from competitively making business loans and taking savings deposits. FHA etc. and Fed policy making often gets blamed but the internet has been the main killer of brick and mortar banking, just as with brick and mortar retailing. The TBTF banks are influencing and in turn being supported in nontransparent and mutually beneficial ways by governments, but also will eventually succumb to market forces.

The better alternative is to force Banks to not take the low-road. The current setup allows Banks to call any loan they deem non-performing, they base that determination off the value of the property and the outstanding balance. In essence, Banks are calling notes due, or refusing to provide renewals on acquisition and development loans, not because they aren’t receiving payments, but because it is easier and safer to foreclose.

Foreclosing means you hurt developers, which hurts the economy, which hurts the bank.

Anyone want to comment on the Disability Rights Treaty that failed to pass the Senate yesterday? I was absolutely saddened that it did not pass and it makes absolutely no sense to me why it didnt. The reasoning is completely unfounded and TO ME is rooted in this whole stupid conspiracy theory that the UN is trying to take over the US (See Agenda 21 crazyness). Come on people. The treaty was written based on the US ADA. Get a grip.

I guess for some people, government is not allowed to try to make the world a better place. The only thing government can do is get out of the way so that people can fight their way out of the caste they find themselves in completely on their own.

I saw the Georgia vs. Georgia Tech basketball game last night. Georgia looks terrible, I do not think they will win more than 9 games this season. Do not understand it, Athens should be an easy place to recruit……………Georgia should have a top 25 team………..